Inflation

2% to 4% inflation is not a good thing for the real people of this country. The “real” people are the people who work for a wage. They are almost at their limits and they are the ones who are most affected by inflation as they try to save. These are the people who are just getting by. They are not math geniuses and economists who went to Princeton, Yale, Harvard. They don’t earn a lot of money, but what they do earn, they put in their time and they get very little in return. Inflation sucks for these people, this is an invisible tax on them. It is an outrage!

I will provide two examples for you.

The first comes from my mother-in-law, we’ll call her Mary Lou. Mary Lou has been a hard working mother her whole life. She raised 6 girls and 1 boy all on the salary of a secretary and sent them all off to college (if they were so inclined). She is frugal but incredibly generous and hard working. But, when it comes to money, do you think she considers that there is 2% to 4% stated rate of inflation as a target and that when she saves her money she should try to protect it from the erosive effects of inflation? No way. Like everyone else in her economic bracket, she has no idea. Inflation is not considered. She knows money ain’t what it used to be, but to her, it is not the money that changed, it is the stuff she has to buy. To her a $1 is still a $1 and that is all.

She recently became ill and the family discovered that she had saved a wad of cash in a drawer along with a wish list of things she wanted to do with it. Who knows how long it took her to save that money? It was probably years and years of saving, downright penny pinching, in order to result in that pile of cash in that drawer. She used to keep her house quite cold in the winter, especially while she was at work or sleeping. She scraped all she could to get that money. It didn’t come easy. If I assume she started saving when the last of her girls left the house and got married, she has probably been saving for close to 20 years!

So let’s look at the effects of that inflation, a.k.a. the mother-in-law tax, 20 years later when she has enough saved and she wants to do one of her projects. Guess what? Some of that money is probably worth half what it was when she put it in there. That SUCKS. It is wrong. Who could possibly think that a 2% to 4% inflation is acceptable. Inflation SUCKS.

The second example comes from my college days. At one time while an engineering undergrad, I was extremely short of money, so I picked up a part-time job at UPS, unloading airplanes at the airport. It was tough, it was cold, it was somehow greasy and dirty. I got there at 4 AM, had the planes unloaded in a few hours and was back in time for a 9 AM class, all without a cup of Starbucks. The pay: $8 an hour! I was thankful for the pay. This was circa 1990, 20 years ago. We have had some inflation since then, I do believe, and our Fed has encouraged it!!

Let’s look at the effect of that inflation. January 1990 we have a CPI of 127.4. October 2010 we have 218.711. My $9 an hour back then is worth a CPI equivalent of $15.45 today, not including food and energy of course because, certainly I wasn’t using the money for food or energy. So now forward flash to December 2010. Just the other day my little brother wanted to pick up some extra cash. He is having some hard times and he thought, hey, maybe I could get some extra hours at UPS during the holiday season. So he goes ahead and applies, interviews, all of that. The pay? $8 an hour. Huh? So UPS pays about the same is they did in 1990, but now it is worth so much less. Again, who does this hurt? The inflation hurts the little guy, the poor guy, the guy who is trying to save and not managing a $1 M portfolio… Had we zero inflation since 1990, my little bro would be making an almost acceptable wage. Instead, the price of gas is now 2 to 3 times what it was back then… it costs him more to get there, more to eat, and there is a lot left over for his effort.

There you have it. Two more reasons why I say that inflation sucks.

Possibly, I should keep quiet about inflation, attempt to get myself into the fed, and then close the thing down, locking in a dollar with a fixed value. But then, how would we pay for our wars?

The Fed is Stealing from You, Deflation is a Good Thing.

You should be outraged. I explain below just why, but I also want to tell you what you can do about it. And you can do something about it, but we all have to act together!

In 2000 the Consumer Price Index was 172.2.
Today (October, 2010) it is 218.711.

Why they feel the need to now measure it out to the thousandths is so f-ing funny, but that is not what this post is about.

219/172 is 27%. So the crap you are buying (just to have a life) is now costing you 27% more than it did 10 years ago. This is theft. The money in your savings is now worth 27% less. It is just gone, missing, kaput, stolen. And the Fed (the one who stole it and gave it to the banks and the fatcats working there) is afraid of deflation. On the other hand, me and you, the people, the not-so-fat-cats, we would love it… we would be quite happy if instead of 27% missing from our savings, we could have 27% more. We could buy 27% more for our money. I don’t even want MORE, I would be happy with just the SAME purchasing power as I had 10 years ago. That would only be good for the people. It is good for the people. The people, don’t care about the banks. So the Fed, who is arguably the most power organization on the planet, clearly is not in this for the people.

The Fed (wait, why am I using a capital, they are getting a small “f” from now on) is afraid of deflation and “the Bernanke” is now saying we need a $600 B quantitative easing. Thanks for stealing me from me Mr. Bernanke. I mean, in the grand scheme of things, are we having any deflation? Hell no, that 27% above is real inflation data from the last 10 years. We aren’t even close!! We are 27% away from them not stealing from us. Even if we deflated 10% a year for the next two years, they still stole 3% from us.

Now, the fed doesn’t count food and energy, you might say, and I have used “All items” when obtaining the CPI, they only measure “core inflation”. Huh, well, the last I checked, I do consume food and energy and all that other stuff, so I am counting it. And I assume food should have gotten cheaper over the last 10 years because we have had advances in science and farming (we call this learning), but alas, the people are not benefiting from these advances via cheaper food. No, we can’t even afford good organic food any more, but that is another post.

The fed doesn’t include housing and maybe that is where we are seeing this awful deflation. By the same logic, I do live in a house, so I count that too. And anyways, is it that bad if housing prices get cheaper for a few years? Doesn’t that make it more affordable for that young couple to buy their first house? I’m not selling mine anyway and I have owned it for 10 years, so it is still worth more than what I paid for it! If it goes down in value, I pay less in property taxes. Hallelujah? Lower taxes and I’ve been jacked to the tune or 50% + on those anyway, see below!

Oh, you say, “Well, it is just terrible for those who bought just 2 or 3 years ago.” Maybe, but not quite? For most of those who bought 3 years ago, they weren’t buying their first house. No they sold an inflated house to buy that new inflated house, and out of all homeowners, regardless of when they got their latest mortgage, they have mostly been living in a house for a lot longer than 3 years. Houses that are 50 years old still have people living in them don’t they? But, in this argument, I will go with only 10 years. That is recent enough. Blink and 10 years go by anyway. Well, looking at the latest 10 years, housing prices since 2000 are up from 220 to 340, or about 50% + property taxes. Housing prices could deflate quite some ways (50% from today’s prices) and it would just make it cheaper for new buyers, with no real loss, no true loss, to homeowners. (I am going envelope here, but this comes from the chart below.)

So why is deflation bad? The answer is “Deflation is not bad for the people”. Deflation is good for the people. Bring it! Your wages will not drop. You get paid the same and you can buy more with your money. Suddenly it makes sense to be a saver!! Wow, go figure?

Deflation is only bad for the BIG banks and for a HUGE debtor, who wants to pay his debts off with a lower valued dollar. Uncle Sam? But currently, it is all about the banks. If those people who bought houses in the last 3 years all see their housing value go down they become underwater (bad loan by the banks) and they might default more often than was planned for. This would show how insolvent these large banks are… so instead of letting this happen to their friends, the fed will steal from you and I (the people) by ramping up inflation and making us pay. And stealing it is! Not only that, but I have to burden myself with future taxes to pay back their $600 Billion.

This is what you can do and I hope you do it. I would be perfectly happy to see the big banks all go away and just keep my money at my local credit union. You should all do that. Go out now and close your bank account at Wells Fargo, Citibank, JP Morgan Chase, wherever it is in those large crappy banks. Get it out now!! Get your money out of that bank and put it into a local credit union.

Thank you for reading these thoughts, if you care.

Please comment.

The Fed Wants to Steal Your Money

This morning I was reading the WSJ and came across an article called “Fed Leans Toward New Aid to the Economy”  http://online.wsj.com/article/SB10001424052748703440004575548252574679386.html?mod=djemTMB_t 

Usually, it takes a reading of the New York Times in order to infuriate me, but this article really takes the cake.   The author discusses the minutes from the Fed’s last meeting.  Delving into the minutes, the Fed states quite blatantly that they want to steal from us.  Make no mistake, that if you have money in the bank, they will be lowering the value of that money as soon as they can. 

Quote:

“Fed officials discussed ways they could push up short-term inflation expectations or at least ensure they don’t fall further. That could mean being more outspoken about wanting a 2% inflation rate, which is widely seen internally as the Fed’s informal target.  The minutes showed some officials also raised the idea of a “price level” target that would allow the Fed to overshoot a 2% inflation rate after periods when inflation had been coming in very low, to make up for lost ground.”

Overshoot?  Lost ground?  You mean to tell me that because you haven’t devalued my money enough over the last year and a half, you now want to crank up inflation a bit more so that you can take even more of it?  This “overshooting” serves no purpose other than to devalue the savings accounts of good honest people.  It is stealing with an invisible hand.  We should all be outraged!

How would a 10% deflation affect me? 

Pros: 

• Well, my house would be worth 10% less.  That is good news because I am not selling my house anyway and I would therefore have to pay tax on a value that is 10% less. 
• I would make the same income because I have a fixed price in my contracts. 
• Everything I consume would cost me 10% less. 
• Money I put into my savings account right now, would be worth 10% more next year.  I would get a 10% return on my savings account!  Hey, people might actually save!  We all would be better off if we took on less debt and saved a bit.

Cons:

• If I carried a lot of debt, I would have to pay it back with dollars that are worth more than they were last year.  However, I don’t care because my income is the same and I don’t carry a lot of debt.  Thus, personally this does not have an impact.
• I would have an incentive to save more and not take out as much debt.  Again, why exactly is this bad to the common man? 
• It would be bad for my bankers.  Oh, I feel so bad for these guys.

As a matter of record, I would be quite happy with the opposite of what the Fed is asking… let’s say a nice temporary deflation that could bring back our ten year inflation average to zero and then an ongoing rate of zero after that.  So, in my analysis, GIVE ME DEFLATION and get the mother-loving Fed out of my life!